Reddit Looks to Investors for Help and Buzz, not Cash

Reddit doesn’t have a cash problem. They had $20 million in the bank when they were given partial independence by Conde Nast two years ago and unless they’re buying solid gold servers and platinum-plated Macs to run the site, they probably have enough to keep going without a hitch for another decade. When Techcrunch reported rumors that the social news giant was looking for investors against a $400 million valuation, many of us wandered why they would risk losing their status as one of the most community-driven websites on the planet by playing into the hands of profit-driven venture capitalists.

The educated speculation coming from Peter Kafka at AllThingsD is that their looking for very specific angel investors who have clout and a willingness to bring “buy-in, and input” to the company. Now that makes more sense. Despite being one of the most influential traffic, opinion, and meme-generating sites on the internet, they are still relatively obscure in the whole scheme of things. In many ways, they’ve flourished as the best-kept secret on the internet. Only the cool kids and tech-savvy people know about the plethora of images, videos, links, and discussions that make addicts out of most who can make it past the Draconian layout of the site.

The secret is getting out – over 400 million people visited the site in 2012, generating 37 billion page views – and if its going to be forced into the mainstream, they want to be ready. That’s what Reddit CEO Yishan Wong wants help with from investors. If they’re on the verge of going big, they might as well control how it happens.

Reddit wants high-quality heavy-hitters from the Silicon Valley jungle who will give instant credibility with their name and sagely advice with their words. It’s not a money play. They’re looking to get $1 million dollars from investors when they could easily pull 50X that amount. It’s a token investment but an important symbol for the imminent popularity at hand. It’s a safe way to go that will keep the site from having any pressure to turn a profit for the sake of meeting investor expectations. In many ways, investors will be privileged to be among the elite who can buy their way into a site that makes things happen, that spikes the traffic of websites lucky enough to catch their eye, and that sees content before it hits the depths of Facebook/Tumblr viral status.

Reddit sets the tastes of the internet in ways that so few know about now. This play is one designed to put the unknowing world on alert. Reddit is coming. You were warned.